Basics of Ichimoku Kinko Hyo Chart

Ichimoku Kinko Hyo (IKH) is an indicator used to measure the potential price action and identifies future areas of support and resistance.

The word ichimoku means “a glance”, kinko means “equilibrium”, and hyo is the Japanese term for “chart.”Thus, ichimoku kinko hyo stands for “a glance at a chart in equilibrium.”

The equilibrium chart generally isolates higher probability trades in the forex market. Although Ichimoku Kinko Hyo has been new to the mainstream, it’s exposure among novice and experienced traders are rising in popularity.

In essence, this indicator is mostly used in the futures and equity forums, which provides a clearer view as it shows more focal points, suggesting a more reliable data of the price momentum.

Multiple tests and combinations of three indicators are applied on a single chart, allowing traders to perform the most reliable decision.

Calculation

Among the five plots of the Ichimoku Cloud, four of which are based on the average of the high and low over a given period of time. For instance, the first plot is gauged as the average of the 9-day high and 9-day low.

Hence, it is easier to measure the high-low average during those times that computers aren’t widely used rather than relying on the 9-day moving average. Moreover, the Ichimoku Cloud consists of five plots:

· Kijun Sen (blue line)

Also known as standard line or base line, which is measured by getting the average of the highest high and the lowest low of the previous 26 periods.

· Tenkan Sen (red line)

Also referred as the turning line, which is measured by getting the average of the highest high and the lowest low for the previous nine periods.

· Chikou Span (green line)

Also recognized as the lagging line, which is measured by today’s closing price plotted 26 periods behind.

· Senkou Span A (orange lines)

It is measured by getting the average of the Tenkan Sen and the Kijun Sen, which is plotted 26 periods ahead.

· Senkou Span B (orange lines)

The second Senkout line on the other hand, is derived by getting the average of the highest high and the lowest low for the previous 52 periods, and plotted 26 periods ahead.

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